The deal is noteworthy not just for the large return, but because between 2000 and 2003, venture capitalists invested more than $3.6 billion in more than 300 “database and file management” companies, according to Thomson Financial (publisher of PE Week). Many of these startups have since floundered, as an increased number of competitors have targeted a waning customer base.
EqualLogic had raised $52 million in VC funding since 2001 from such firms as
EqualLogic’s thesis when it was launched was that the storage space was simply too complicated, due to the limited and proprietary nature of existing commercial verticals. The solution, said the company founders, would be to transpose the plug-and-play nature of Ethernet on storage.
“There was a lot of money invested in the storage space back when we first funded EqualLogic,” says Greg Gretch, a managing director with Sigma Partners. “But this was a class VC success story in that the company management was a group of tech people with a novel idea and vision, and those ideas combined with execution helped them succeed within a crowded market.”
The company was scheduled to begin its IPO road-show with the company expecting to raise about $125 million.
A side note e to Dell’s agreement to acquire EqualLogic is that two of EqualLogic’s investors are no longer working as venture capitalists.
Chris Baldwin, who originally met some of the EqualLogic founders while an engineer with Digital Equipment Corp. in the 1980s, was with CRV at the time that EqualLogic was founded in 2001. Baldwin continues to represent CRV on certain boards, but is not a partner on the firm’s recently-raised 12th fund. Instead, he plans to either launch or join a startup in an operational role.
Also, Elliot Swan, who led EqualLogic’s second round in 2003 for TD Capital Ventures (now known as Fairhaven Capital, left the firm in 2005. He now serves as director of technology licensing for Raytheon Corp.